SALT Pets of the Month: Johnny and June Meet Johnny and June (yes—as in Johnny and June Cash!), also known as “June Bug” and “Murr.” These four-and-a-half month old kittens belong to Sacramento SALT receptionist Sheryl Burns and her husband, Jordy.

Eversheds Sutherland SALT Scoreboard Publication–Fourth Quarter 2017 Eversheds Sutherland SALT releases the eighth edition of its SALT Scoreboard, a quarterly publication that tracks significant state tax litigation and controversy developments. This edition of the SALT Scoreboard includes our year-end observations for 2017, a discussion of the Pennsylvania Supreme Court’s decision in Nextel, and a spotlight on apportionment cases.

A Pinch of SALT: Maryland’s Alternative Apportionment Violates Internal Consistency This installment of A Pinch of SALT examines the comptroller of Maryland’s practice of attributing in-state operating companies’ apportionment factors to affiliated out-of-state holding companies. This article posits that this type of attribution violates the internal consistency test reflected in the US Supreme Court’s dormant commerce clause doctrine.

California’s Altered Tax Landscape On January 10, 2017, California Assembly member Phil Ting introduced and read Assembly Bill (“AB”) 102 for the first time. Introduced as a placeholder bill, AB 102 consisted of a single section and sentence: “SECTION 1. It is the intent of the Legislature to enact statutory changes relating to the Budget.” Then, in less than two weeks in June 2017, the California Legislature gutted and amended this innocuous bill into a 19-page plan to drastically alter the landscape of California’s tax system. As signed by the governor, AB 102 stripped the California State Board of Equalization of all but its constitutional powers, created a new agency named the California Department of Tax and Fee Administration, and created a second new agency named the Office of Tax Appeals. Three months later, clean-up legislation in AB 131 made further changes. In his article for the January 2018 edition of the Journal of Multistate Taxation and Incentives, Eversheds Sutherland attorney Eric Coffill discusses the history and events leading up to those changes and provides a glimpse of the (somewhat uncertain) California tax landscape going forward.

Many State Tax Incentives Are Now Taxable Due to Federal Tax Reform Recently enacted federal tax reform is expected to generate $6.5 billion in additional federal revenue through 2027 by increasing corporate tax liability for certain state and local incentives. In their article for Bloomberg, Eversheds Sutherland attorneys Timothy Gustafson and Hanish Patel discuss the change and opportunities to minimize its impact.

Meet Johnny and June (yes—as in Johnny and June Cash!), also known as “June Bug” and “Murr.” These four-and-a-half month old kittens belong to Sacramento SALT receptionist Sheryl Burns and her husband, Jordy. After the loss of their Labrador Retriever, Raven, in July (previously featured as the February 2017 SALT Pet of the Month), they debated on whether to get another dog. A few months later, a friend at the local animal shelter contacted Sheryl about an abandoned litter of kittens. She sent her pictures of the kittens, and Sheryl immediately fell in love with the black and white male and his little orange tabby sister. When they are not wrestling with one another, the kittens love to sit by the windows and look outside. June is the instigator of most of the kitty mischief that goes on around the house. Sheryl is quite sure that June dreams of being an outside kitty, while Johnny is perfectly content staying indoors to slide Q-tips and hair bands across the floor. They are very affectionate and love to snuggle. At bedtime they start out either on the chair in their bedroom or on their cat tree, but by morning they are both tucked in bed with their humans. We are so excited to feature Johnny and June as our January Pets of the Month!

To submit YOUR pet to be featured, visit the Eversheds Sutherland SALT Shaker App, click the Pet of the Month in the drop-down, then click “Submit A Pet.”

The Eversheds Sutherland SALT Team is always excited to see what kind of pets our clients and friends have. Our team features a different pet at the end of every month, and we want to feature YOURS! Featured pets will receive a fun prize from the SALT Team. The deadline for January submissions is Friday, January 26.

To submit your pet to be featured, visit the Eversheds Sutherland SALT Shaker App, click “Pet of the Month” in the drop-down, then click “Submit A Pet.”

Eversheds Sutherland SALT releases the eighth edition of its SALT Scoreboard, a quarterly publication that tracks significant state tax litigation and controversy developments. This edition of the SALT Scoreboard includes our year-end observations for 2017, a discussion of the Pennsylvania Supreme Court’s decision in Nextel, and a spotlight on apportionment cases. For 2018, we will reset our tallies and track the latest developments as they are issued in the new year.

On January 10, 2017, California Assembly member Phil Ting introduced and read Assembly Bill (“AB”) 102 for the first time. Introduced as a placeholder bill, AB 102 consisted of a single section and sentence: “SECTION 1. It is the intent of the Legislature to enact statutory changes relating to the Budget.”

Then, in less than two weeks in June 2017, the California Legislature gutted and amended this innocuous bill into a 19-page plan to drastically alter the landscape of California’s tax system. As signed by the governor, AB 102 stripped the California State Board of Equalization of all but its constitutional powers, created a new agency named the California Department of Tax and Fee Administration, and created a second new agency named the Office of Tax Appeals. Three months later, clean-up legislation in AB 131 made further changes.

In his article for the January 2018 edition of the Journal of Multistate Taxation and Incentives, Eversheds Sutherland attorney Eric Coffill discusses the history and events leading up to those changes and provides a glimpse of the (somewhat uncertain) California tax landscape going forward.

The New Mexico Administrative Hearings Office affirmed the Taxation and Revenue Department’s assessment to Agman Louisiana Inc. based on the taxpayer’s gain from the sale of stock of a corporation in which the taxpayer owned less than a 50% interest. The Hearings Office ruled that such gain was apportionable business income subject to New Mexico corporate income tax. Agman argued that the gain was non-business income and must be allocated to its commercial domicile. The Hearings Office disagreed and determined that Agman met New Mexico’s three-prong business income test in NMSA 1978 § 7-4-2(A). Under the first prong of that statutory test, the Hearings Office summarily concluded that Agman met the threshold “transactional test” because the sale arose from “transactions and activity” in the “regular course of the taxpayer’s trade or business.” Agman met the second prong “disposition test” because the income from the stock sale arose from the disposition of a business. The company also met the third prong “functional test” because the income from the sale of the stock provided the taxpayer with an “operational benefit integral to [its] business.” Finally, the Hearings Office ruled that characterizing the gain as apportionable business income did not offend the US Constitution because the stock that generated the gain served an “operational rather than investment function,” as explained in the Supreme Court’s Allied Signal and MeadWestvaco decisions. In the Matter of the Protest of Agman Louisiana Inc. v. Taxation & Revenue Dep’t, N.M. Admin. Hearings Office, Decision and Order No. 17-47 (Dec. 5, 2017).

The New Jersey Tax Court held that New Jersey could not impose corporation business tax on a foreign corporation’s foreign source income that was not included in the federal tax base because of a treaty benefit. Although New Jersey is permitted to adopt a legislative addback for exempt foreign source income, it did not, and therefore, it is presumed that federal taxable income is the starting point for computing New Jersey entire net income for purposes of the New Jersey corporation business tax. Infosys Limited of India, Inc. v. Director, Division of Taxation, Dkt No. 012060-2016 (N.J. Tax Nov. 28, 2017).

This installment of A Pinch of SALT examines the comptroller of Maryland’s practice of attributing in-state operating companies’ apportionment factors to affiliated out-of-state holding companies. This article posits that this type of attribution violates the internal consistency test reflected in the US Supreme Court’s dormant commerce clause doctrine.

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